Economic Theories

1. ECONOMIC THEORIES
C A P I T A L I S M
S O C I A L I S M
C O M M U N I S M

2. ECONOMIC SYSTEM
The way a country chooses to use its
resources to produce and distribute
goods and services for its people

3. CAPITALISM
How is a country’s economic system and political system
connected?

4. CHARACTERISTICS OF CAPITALISM
Capitalism is an economy
based on private
ownership and productive
property
Productive Property
Productive property like a workers
tools are used to produce things of
value

5. THE FOUR FACTORS OF PRODUCTION
Land
Management
Labor
Capital

6. LAND
Can be used for agriculture ,
mining, forestry, industry, and
retail stores

7. LABOR
Men and women who work in
business and industry

8. MANAGEMENT
Skilled men and women who organize other
factors of production and make businesses run
efficiently.

9. CAPITAL
Money, factories, or machinery used to produce
goods and services.
Capitalist- a
person who has
capital and puts
it to productive
use

10. FREE-ENTERPRISE SYSTEM
In a free enterprise system people are free to start and
run enterprises, or businesses.
Five Characteristics of Free
Enterprise
1.Private ownership
2.Property rights
3.Private decision makers
4.Competition
5.Freedom of Choice

11. PRIVATE OWNERSHIP
I N D I V I D U A L S O R G R O U P S O F
P E O P L E O W N M O S T O F T H E
M E A N S O F P R O D U C T I O N I N A
F R E E E N T E R P R I S E

12. PROPERTY RIGHTS
T H E G O V E R N M E N T W O R K S T O
P R O T E C T P R I VAT E P R O P E R T Y.
A P E R S O N C A N U S E P R I VAT E
P R O P E R T Y T O T U R N A P R O F I T.
T H E G O V ’ T C A N R E G U L AT E S O M E
P R O P E R T Y R I G H T S .

13. PRIVATE DECISION MAKERS
B A S I C D E C I S I O N S A B O U T W H AT T O
P R O D U C E A N D H O W M U C H T O
P R O D U C E I S L E F T U P T O
I N D I V I D U A L S A N D C O M PA N I E S

14. COMPETITION
C O M PA N I E S C O M P E T E F O R
C U S T O M E R S , T H I S C O M P E T I T I O N
A L O N G W I T H T H E L AW O F S U P P LY
A N D D E M A N D H E L P T O D E T E R M I N E
T H E P R I C E O F G O O D S A N D
S E R V I C E S
High supply + low demand =
Low supply + high demand =

15. FREEDOM OF CHOICE
C O N S U M E R S C A N C H O O S E W H AT
T H E Y B U Y, H O W M U C H , A N D F R O M
W H O M . W O R K E R S H AV E T H E
C H O I C E T O W O R K W H E R E T H E Y
W A N T

16. MIXED ECONOMY
B O T H P R I VAT E B U S I N E S S A N D
T H E G O V E R N M E N T P L AY A R O L E
I N T H E E C O N O M I C S Y S T E M
G I V E A N E X A M P L E .
The United States is an example of a mixed
economy

17. KINDS OF BUSINESS IN A FREE ENTERPRISE
Kind Advantages Disadvantages
Sole Proprietorship
-A business owned by
one person
Partnership
- A business owned by
two or more people
Corporation
- Has many owners
called share holders.
Corporations are
owned by the public

18. SOCIALISM
I S B O T H A N E C O N O M I C A N D A
P O L I T I C A L W AY O F T H I N K I N G . I T
S AY S T H AT T H E N AT I O N ’ S W E A LT H
S H O U L D B E D I S T R I B U T E D T O
E V E R Y O N E I N A FA I R W AY
In socialism, ownership is public
rather than private. The government,
not the individual, is at the center of
the economy

19. A SOCIALIST’S THEORY OF EQUALITY
A S O C I A L I S T B E L I E V E S T H AT
P E O P L E N E E D T O B E E Q U A L
P O L I T I C A L LY A N D E C O N O M I C A L LY.
R E A L E Q U A L I T Y O N LY H A P P E N S
W H E N T H E P U B L I C C O N T R O L S T H E
C O U N T R Y ’ S E C O N O M Y

20. THE ORIGIN OF SOCIALISM
S O C I A L I S M C A M E A B O U T D U R I N G
T H E I N D U S T R I A L R E V O L U T I O N . T H E
I N D . R E V. G AV E B I R T H T O M A N Y
FA C T O R Y J O B S . T H E S E J O B S W E R E
D A N G E R O U S A N D R E Q U I R E D L O N G
H O U R S F O R W O R K E R S I N H O R R I B L E
C O N D I T I O N S . W O R K E R S W E R E PA I D
V E R Y L I T T L E F O R T H E I R L A B O R .
P E O P L E B E G A N T O L O O K F O R
C H A N G E S .

21. SOCIALIST ECONOMIES
Socialist Economies
Nationalization- is the gov’t takeover of privately owned businesses
The Welfare State- Everyone should have food and a place to live. The
gov’t provides healthcare and unemployment benefits.
High Taxation- The government’s money comes from taxes. Public
services are expensive.
Command Economy- The gov’t makes decisions about the economy, not
individuals.

22. IS SOCIALISM GOOD OR BAD?
Positive Negatives
Socialism evens out differences. Socialism is too complicated.
Socialism gives people control over
their lives.
Socialism robs human incentive.

23. COMMUNISM
Is a political system in which the
government owns all property and
is ruled by one party with
complete power over the
economy.

24. THE UNITED SOVIET SOCIALIST REPUBLIC
U.S.S.R
- The USSR was the first communist state. It
lasted from 1917 until 1991. Communism in
the USSR did not work.
- The best example of communism exists
today in China.

25. KARL MARX AND COMMUNISM
Father of Communism
- The Industrial Rev.
brought only suffering to
the working people of the
world
- The bourgeoisie (upper-
class) take advantage of
the proletariat (lower-
class working people)

26. MARX’S IDEAS
The Problem
The Bourgeoisie make a profit off the proletariat’s hard work,
and the gov’t protects the power of the bourgeoisie.
The Goal
All people should be economically equal. Wealth should be
distributed.
The Solution
The working people should unite and take control of the gov’t
and the economy!
The Aftermath
Economic classes would eventually disappear, and then gov’t
wouldn’t be necessary.

27. STEPS TO A COMMUNIST REVOLUTION
1. The Bourgeoisie controls production and profits
2. The Proletariat rise up against the Bourgeoisie
3. The Proletariat create a temporary government
4. The Proletariat distributes the wealth equally to
everyone
5. The government is no longer necessary and is abolished